The current banking system is moving toward cashless devices for both consumer and commercial transactions. The most common of cashless devices is the credit card or "plastic" as it is commonly called. Credit cards are issued by banks and other organizations and trillions of dollars are charged on credit cards each year in the United States. Generally, the conventional credit card is issued by companies such as VISA, MASTERCARD, AMERICAN EXPRESS and the like which establish a network of participating merchants that accept the cards. Banks and other institutions service the accounts. The consumer can then charge goods and services at participating merchants and the participating merchants pay a percentage of the transaction, usually several percent, to the credit card company. In order to promote use of a particular credit card and to induce merchants to participate, credit card issuers rely on various marketing techniques. For example, some credit card companies offer special discounts to users of cards if they participate by buying particular products or services. Other card issuers such as DISCOVER card rebate a small percentage to the consumer, again typically in the order of several percent. Other types of promotional devices include credits based on credit card activity which may be used when purchasing large ticket items such as vehicles.
In addition to the conventional credit card, other types of cards are used in commercial transactions. More and more, cards known as shopper loyalty cards and frequent shopper cards, are issued to customers by businesses such as grocery chains. These businesses promote use of these cards as a convenient alternative to paper coupons. The object of use of such cards, similar to the frequent flyer programs run by airlines, is to build loyalty by offering customers discounts. The customer presents the card to the merchant at the time of purchase and the card is scanned and certain items are then discounted. The advantage to the merchant is that such cards utilize a database eliminating the need for checkout cashiers to visually and electronically scan coupons. As mentioned above, such cards also build customer loyalty and also serve to obtain information on shoppers' buying habits and demographics, therefore providing the grocery store valuable demographic and product information which will assist in its marketing of products.
Other types of cards are known as SMART cards or e-cards. These cards are an alternative to the use of hard currency and basically a SMART card stores funds digitally. SMART cards of the type produced by Productivity Enhancement Products of Laguna Hills, Calif. work like an automated teller. These cards are personalized and protected by an identification system, typically a PIN number or a photo. The cards function like cash with their value stored on a computer chip embedded on the card which stored value is reduced by the amount of the purchase at the time of use. Merchants may then use PC based cash registers to deduct payments from the cards. SMART cards can be used to buy items and cards of this type are commonly used by students for purchasing meals at university cafeterias and are promoted for use in making telephone calls.
Other types of financial cards commonly used are debit cards which are presented to a cashier and the card is electronically "swiped". The user may then authorize a direct deduction from a checking account in the amount of the purchase or an amount which includes additional cash back to the user.
While many consumers actively use such cards, these same consumers are greatly concerned about the stability of the Social Security system and their own retirement. Studies show that the average worker has not adequately provided for his or her retirement. Further, the social security system is experiencing increasing financial problems. According to the trustees, the United States social security system will be insolvent by the year 2029. Currently Social Security taxes generate more revenue than the system pays out in benefits. The surplus theoretically accumulates in the social security trust fund. However, it is estimated that in the year 2012 the situation will reverse and the Social Security system will be obligated to pay out more in benefits than it collects in revenues. To continue to meet its obligations, the system will have to begin drawing on the surplus in the trust fund. In actuality the trust fund surplus is a fiction as the federal government has used the trust fund for other purposes and has over the years "borrowed" money from the trust fund to disguise the actual amount of the federal budget deficit. Effectively, the federal government has been borrowing from the social security fund and issuing IOU's in the form of bonds to the Social Security fund. It is estimated that in 2012 the Social Security system will have to start turning in the bonds to the federal government to obtain cash needed to pay benefits, but the federal government has no cash or other asset and, therefore, the deficit will accelerate.
Even if the financial difficulties of the present Social Security system can be fixed, the system is not a sound investment for most Americans who contribute and is even worse for younger workers. Payroll taxes are high and even if today's younger workers receive the promised benefits, those benefits will amount to a below-market return on their taxes. Today's retirees generally get back all they have paid in to Social Security, plus a modest return, but when younger workers retire they will actually receive a negative rate of return which will be lower than the amount of contributions.
Based on these problems, there are various reforms that have been proposed one of which is the privatization of the Social Security fund.
Unlike private pensions and individual retirement accounts, the Social Security system does not invest the money it collects in stocks and bonds but pays those funds out as benefits the same year they are collected.
Accordingly, because of the deteriorating financial condition of the Social Security system, it becomes more and more incumbent upon individuals to plan for their own retirement to ensure a secure future. The present system is based on the underlying concept that merchants and credit card issuers would be willing as an inducement to pay a percentage of the transaction as a refund into a tax deferred fund for the benefit of the card holder.
Various rebate and refund systems can be found both in the prior art and patent literature. For example, U.S. Pat. No. 4,750,119 describes a purchasing system with a rebate feature which allows for the input of purchase orders and correlates transfer of funds from purchasers to vendors. A future benefit guarantor supplies the rebate factor which is input into the system. The system then computes and reports the rebate which is due in the future to each subscriber or purchaser. The system provides instructions to pay the vendors for selected goods and services and pay the future rebate guarantor a premium representing the purchase price of future guaranteed rebates. Preferably the premium is paid on a daily basis to the guarantor and a group annuity contract is funded.
U.S. Pat. No. 4,941,090 shows a centralized computer cash value accumulation system based on point of sale transactions with multiple merchants. The consumer's account number and birth date are transmitted to a central system along with data identifying the merchant and a credit line determined by the merchant. At the central location, a cash value for that consumer is incremented by the credit value and a bill for that merchant is similarly incremented. Periodically the merchants are billed for the accumulated bill value. Also at selected intervals, consumers are given access to their respective accumulated cash values by either check or through funds dispensed electronically. Preferably the intervals are selected to correspond to the birth dates of the consumers.
U.S. Pat. No. 5,537,314 shows a credit accumulation and accessing system for a plurality of sponsors and participants. Under the control of an operational program, several tasks are accomplished including creating sub-directories for a single participant account so as to selectively associate the single account sub-directory with multiple sponsoring company accounts in deciphering and, accordingly at points of sale, calculating, posting and issuing discounts, raffle entries, store credit returns, points and cash values in accordance with the performance of participants. Award output devices provide consumers access to funds based upon the cash value in the consumer account and may include wire transfer, check, cash coupon, charge card balance reduction or catalog merchandise.